Changes in the World and Their Effect on Energy

Everywhere we look things are always changing.  Now that winter is leaving, spring has sprung.  In Houston we’re back up to the mid 70’s and we hope that lasts a long time.  While we may not be able to see some of the changes, like the movement of the stars, the changing face of the planet, or the shrinking of my book collection as I slowly switch everything over to the Kindle, other things are more apparent.  The birth of a baby bird or the emptying of a glass of a pleasant draught on a warm winter day, or the regime change of a country are all easy to see.

Lots has happened recently throughout the world.  Southern Sudan has seceded from the rest of the country.  Egypt and Libya have experienced popular uprisings, and other countries in the region are holding their breath to see what happens next.

You might be asking yourself, “why is he talking about this in an energy blog?” or “how can it possibly affect me?” This is a perfect time to talk about how events in other countries can affect the energy polices at home.

Egypt has a long history.  It has kept our imagination for centuries. From Herodotus to Sadat, from Alexander to Cleopatra, the great names associated with Egypt are innumerable.  The entire world can identify the famous objects from the land of the Nile (even when they’re in other countries).

Suez Canal as seen from Earth’s orbit

Modern Egypt produces about 660 thousand barrels of oil a day. In recent years it has grown its natural gas industry and has the third largest reserve of natural gas in Africa. Egypt is very important in the energy field for a different reason, the Suez Canal. While the largest hydrocarbon tankers are too large to pass through, 20% of the shipping that goes through the canal is hydrocarbon transportation.  If the canal were to shut down it would add a week or two to time to transport the hydrocarbons to their destination.  If that happen the increased transportation cost would make the cost of crude oil rise.  That’s why I’m talking about Egypt in an energy blog.

Libya has always been at the center of trade.  Under both the Phoenician and the Romans it prospered.  It was a major and power trade location in the 19th century as well.  It was an Italian colony during World War I and administer by the British after World War II.  After gaining independence in 1951, its current government came to power in 1969.  Currently there are large protests occurring across the country.

Again you may ask, “how does this affect me?’

Libya is a member of OPEC and has the largest oil reserves in Africa (44.3 billion barrels).  They produce about 1.4 million barrels a day.  The profit of the oil exports accounts for 80% of their revenue.  If all oil production in Libya stopped, Saudi Arabia might be able to use its excess capacity to keep global oil production levels stable.  But that’s assuming nothing else happens.   And the longer Libya is not producing, the more likely something else would happen.  In any of these events, the price of crude oil would climb, and with that the cost of gasoline and other petro products would go up (the cost of crude oil has leapt up to $99 over the past couple of days as a response to the protests).

back alley
Creative Commons License photo credit: tvol

As you can see, events throughout the world can affect you.  Therefore you should pay attention to what’s going on around you (if you walk with your head down you might run into that new shelves they have at Half Price Books).  Thankfully not all of it is as confusing as complexity theory.